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Trying to defend a wrongful termination, harassment, discrimination or other lawsuit with no evidence about negative workplace incidents or prior employee acts or patterns of behavior can weaken your ability to defend your small business in court. Insurance companies may be able to avoid paying claims if you cannot document instances of negative events at your place of business, such as equipment failures, theft or vandalism. Creating a company handbook, disseminating it to employees and having a system for verifying insubordination, harassment or other instances of negative employee behavior, as well as no-fault negative events, will help you avoid the legal problems that can arise from an employee lawsuit and prevent unsuccessful insurance claims.

1. Create a written corporate policy covering behavior such as attendance, breaks, dress, harassment, dating, gossip, physical contact, substance abuse, theft, safety violations, parking and use of equipment for personal reasons. Include your policy for reporting and responding to grievances. Create a written policy covering the reporting of accidents and other negative incidents, whether or not they involve employees and regardless of whether anyone is at fault. Give the document to an attorney or human resources professional to review. Distribute copies of your policy to employees and have them submit, either by email or in writing, acknowledgment that they have read, understand and agree to the terms of your policy. For written acknowledgments, require a signature, title and date. An email will show the employee’s return address and the date and time sent.

2. Meet with employees involved in a negative incident when one occurs. Have a neutral, third-party employee witness the meeting if it involves an employee problem. Listen to the reports of the incident and ask each involved party to document a response in writing along with his signature and the date. Ask any witnesses to the occurrence to put what they saw or heard in writing and to sign and date their notes. If the incident does not involve an employee, such as vandalism to your premises, theft or a machine malfunction which damages your property, have the person who fills out the report include as much detail as possible, including the date, time and any other pertinent facts. If other employees witnessed the event, ask them to sign and date the report. File a police report when you believe an incident may be criminal.

3. Decide on a course of action and consult with an attorney or human resources professional to discuss the legality of your response to a personnel incident. Meet with the employee and provide your response to the incident in writing. Let the employee read your response, which should include any action you are taking, and have him sign and date it. Have a neutral, third-party employee witness the meeting.

4. Put all documents concerning employee incidents in the employee's personnel file and keep them for the duration of the employee’s time with the company and for at least a year afterwards, in case the employee sues the company after he leaves your employ. Keep non-fault documents in a separate file. Discuss with your attorney if you should send copies to your landlord or insurance company.

About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.